Bye Bye Baidu?

These are dangerous times for momentum stocks. Green Mountain Coffee Roasters (GMCR) has been taken to the woodshed since David Einhorn, president of Greenlight Capital, took a shot at its accounting methods recently. Netflix (NFLX) shares were poleaxed by subscription woes Monday. Amazon (AMZN) shares got a haircut after disappointing earnings Tuesday. And hedge-fund manager Whitney Tilson went after CEO Marc Benioff's Salesforce.com (CRM) today.

The Chinese search engine's stock is a high-flier. It's hard to believe but on Dec. 5, 2008, it was at $10. Its 52-week high this year is $165. The stock has been a monster.

But that growth has slowed. The stock is "only" up 13% in the past year. That's not much better than the 5% return the Nasdaq has seen over the same period. That is not what most people pay for when they buy into a mo-mo stock, and certainly not a Chinese mo-mo name. Sina (SINA), by comparison, has grown 46% in the past 52 weeks.

Baidu has continually beat analysts' revenue expectations over the past year, typically by 4% to 5%. And the revenue estimates keep growing. Baidu booked revenue of $528 million in the last quarter. This quarter's consensus estimate is for $618 million. Next quarter, it's estimated to do $647 million compared with $282 million in June 2010 quarter.

Earnings-per-share estimates are also high. Analysts expect EPS to rise to $0.83 from $0.72 this quarter. Next quarter, the company is expected to earn $0.85 and in 2012, analysts expect full-year EPS of $4.38.

It's easy to get dizzy thinking about Baidu's success. But here are some facts comparing the "Google of China" and Google (GOOG) itself:

Google's trailing year EBITDA is $13.4 billion, Baidu's is $900 million

Google's forward price-to-earnings ratio is 13x, Baidu's is 29x

Baidu's forward PE has actually come down quite a bit -- it was more than 50x earlier this year.

I like Baidu. I believe it is a well-run company with amazing people. However, there's too much risk that it will announce slowing growth in China during tomorrow's earnings call. If it cuts guidance for next quarter or next year, expect a swift price correction in the stock.

Netflix's forward PE ratio used to be stratospheric. Now it's at 12x.

So, I'm expecting a drop in Baidu after tomorrow.

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